Savannah-based clothing retailer Citi Trends is turning heads with some eye-popping growth, and analysts say there's every reason to believe the company's success will continue.

Citi Trends has been building its "value-priced'' urban fashion, apparel and accessory business into a force that, as a publicly traded company since last year, has blossomed into a company that Wall Street analysts are keeping on their radar.

In seven years, the company's number of stores has grown from 85 to 261 stores. This year, it opened 26 new stores through the end of September, and anticipates opening 40 to 43 new ones by year's end. In the next eight to 10 years, it's not out of the question that Citi Trends could have as many as 800 stores, Chief Executive Officer Ed Anderson said.

Numbers like that are drawing attention.

Citi Trends was cited by the Wall Street Journal as having the No. 1 initial public stock offering of any company in the United States in 2005. The Atlanta Journal Constitution ranked it second in its annual listing of the top 100 companies in Georgia for 2005.

In Savannah, its presence is decidedly more low-key. It operates an approximately 170,000-square-foot distribution center at 102 Fahm St., a blocky white building that doubles as its corporate headquarters.

There are two local Citi Trends stores - one on U.S. 80 in Garden City and the other in the Victory Shopping Center on Victory Drive near Truman Parkway.

The other 259 stores are located throughout Georgia and 16 other states in the Southeast, Midwest and Mid-Atlantic states.

Citi Trends sells "value-priced" clothing, meaning its prices for brand-name clothing are often 20 percent to 60 percent less than the manufacturers' suggested retail price.

Anderson and retail analysts say Citi Trends' prices and products are attractive to low- to middle-income African-American families, and they believe the company will continue to grow because few other chains offer urban wear to the entire family.

"We have identified this market over time as a market where we have been successful," said Anderson, who has been CEO since 2001. "There is a lot of trial and error in developing a successful retail concept. You keep trying new things to see what works. We found that the more we targeted the African-American customer, the more successful we were becoming."

Savannah resident Theresa Roberson is a regular shopper at Citi Trends. She looks for fashionable brands such as Baby Phat but also looks at her savings, too.

"The prices are reasonable,'' she said. "I don't even go to the mall anymore. You can get Apple Bottom jeans that normally are $69 or $70 here for $29. That's a big difference.''

Anthony Andrews of Hinesville makes occasional drives up from Liberty County to shop at Citi Trends. He rates their selection and quality as "very nice,'' but also has four good reasons - three boys and a girl ages 3 to 11 - to stretch his clothing budget as far as he can.

"You can save a lot of money compared to other places,'' he said.

A controlled expansion

Its quick growth notwithstanding, Citi Trends, with its 261 stores, is still considered small by retail standards, said analyst Dorothy S. Lakner, a retail analyst with CIBC World Markets Corp. Chains such as GAP and The Limited each have more than 3,000 stores.

Lakner said Citi Trends has been successful in part because it hasn't expanded too fast.

"They are gradually expanding their store square footage by 20 to 25 percent a year," Lakner said. "This is a pace that they appear to be comfortable with and can control."

Lakner added that the company sells urban wear for the entire family, which she said is a market that is "underserved."

In a recent report to investors, Lakner calls the company "one of retail's most attractive growth stories, with no real competition."

Shaun Smolarz, a retail analyst with Sidoti & Co., an independent equity research firm in New York, said about 70 percent of Citi Trends customers are African American. His assessment was similar to Lakner's.

"Citi Trends is the only company in retail where you will find discount pricing for urban products that appeal to the entire family," Smolarz said.

During Citi Trends most recent quarterly earnings release on Aug. 16, the company reported $76.3 million in total net sales during the second quarter (April, May and June), which was a 28.4 percent increase over the $59.5 million in sales in the second quarter of 2005. Sales at comparable stores (stores that have been open at least a year) increased 7.3 percent. Each month of the quarter, comparable stores reported year-over-year increases.

During August and September, sales were strong as well. Total sales for the four weeks ended Aug. 26 increased 31.5 percent to $32.6 million from $24.8 million during the comparable period last year. Comparable store sales increased 13.7 percent.

Total sales for the five weeks ending Sept. 30 increased 27.2 percent to 28.5 million compared with $22.4 million for the comparable five-week period ended Oct. 1, 2005. Comparable store sales increased 8.3 percent for the period.

Analysts and others who follow retail consider sales at comparable stores an important indicator of a business strength. This is another measure of the company's strong growth, the analysts say.

"For us, it's a good stat," Anderson said. "We have not had a down quarter in comparable store sales for six straight years."

However, Anderson believes the company growth mostly comes more from adding new stores, which expands the company's market.

Suppliers and store location

While the strong sales and success can fuel talk of expansion, Anderson and George Bellino, company president and chief merchandising officer, say they tread carefully when it comes to opening new stores and choosing new markets.

Bellino said the company considers an area's income level, age and ethnicity. Like most off-price or discount-price stores, Citi Trends locates stores in strip malls that often have grocery store anchors.

"There may be other apparel stores, too," Anderson said. "If you go to Victory Square at Truman Parkway and Victory Drive and look at that structure, you'd find that to be a pretty typical Citi Trends center."

The company's success in strip malls has earned attention from the International Council of Shopping Centers. Citi Trends was selected by the council as one of the top 5 retail companies for 2006 for prospective landlords. The council is a huge group of shopping center landlords that leases retail space to individual stores.

Another aspect the company considers before expanding is the logistics involved in opening a new store. Anderson said it takes time and effort to find the best location, hire store staff and managers and make sure enough merchandise is ordered.

Citi Trends has strong relationships with clothing manufacturers, Bellino said. Its 25 buyers attend shows in New York City and Los Angeles - where most of the urban fashion industry is headquartered - in search of the latest fashions. All company buyers spend one week per month in New York and they go to Los Angeles four or five times a year, he said. "We also have buying offices in both cities," Anderson said. "Although most of our buyers are here in Savannah, we have two buyers who reside in New York and one resides in Los Angeles."

The buying staff is divided by category and by vendor. One group focuses on men's clothing, another on women's clothing, and another on children, etc.

"This allows the buyers to focus on specific categories, to get to know the business better and do a more effective job of buying," Anderson said.

Once buyers make their selections, the apparel is shipped to two distribution centers - one in Savannah and the other in Darlington, S.C. From there the merchandise is sent to individual stores.

All stores get virtually the same clothing and the same quantities, at least in the beginning, Bellino said. The company and individual stores track what sells best and make adjustments when replenishing merchandise. Some stores, for instance, might sell more brand-name items; others may sell more off-brands, while others may sell more men's clothing.

Because of its value pricing, the company rarely has big markdowns. Anderson said customers aren't confused by the company's pricing structure, and they don't have to wait for big sales.

"As a retailer, Wal-Mart made everyone believe that you didn't have to move prices around," Anderson said. "When you keep moving prices, it's a lot of work for your store. People trust your pricing, and they don't have to wait to buy your merchandise."

Bellino said the company rarely advertises in any of its markets. When it does, it's usually on radio, and it is what he called institutional advertising, meaning the store itself and not a specific product is the focus of the commercial.

"We spend less than one percent of our sales on advertising," Anderson said. "What advertising we do is for new stores, say a grand opening, or at Easter, back-to-school or around the Christmas holiday."

About 40 percent of company sales are generated by nationally recognized brands such as Phat Farm, Baby Phat and Rocaware, Anderson said. But so-called off brands sell well, too.

"We don't try to push merchandise onto a customer," Anderson said. "We let customers tell us what they want. We want to know more than anyone else does about urban fashions. You do that by being in the markets, shopping the competition and being in our stores."

Starting in 2003, Citi Trends began opening larger stores. Previously, new stores had been just over 6,000 square feet. Now, new stores average about 10,000 square feet.

"This goes back to offering clothing for the entire family," Anderson said. "We made a conscious decision to open the bigger store to a more complete assortment of merchandise."

Stunning IPO

Citi Trends, which went public in May 2005, made headlines after what one analyst called a "stunning" initial public stock offering.

Starting at $14, the company's stock was $42.69 by year's end. It has now settled back to about $36 a share. Based on the stock price increase during 2005, The Wall Street Journal rated Citi Trends' initial public offering as the best IPO in the nation during 2005.

Anderson believes the successful IPO was a recognition that the company had - and still has - strong growth and profit potential. He added that he rarely focuses on the stock price when he meets with analysts or investors because there is so much about the market that he can't control.

"We talk about what we can control, which is our business," he said. "And over the long term, it's our business that ultimately drives the stock price - growth in profitability, growth in new stores, growth in sales and revenue."

What lies ahead

Anderson and Bellino are optimistic that Citi Trends will continue to grow. One of the keys is having the right merchandise at the right store at the right price, Anderson said.

Having the right merchandise now and having the right merchandise five years from now means Citi Trends - like every other retailer - must continue to re-invent itself, Anderson said.

"We have to stay fresh and continue to improve our merchandise assortment," he said. "We want to continue to improve our store presentation and maintain a nice, clean operating environment. We have always done that well; that's how you continue to improve your store sales on a per-store basis. Stores that don't change go out of business."

Company roots

Citi Trends' roots extend back to the 1940s to a company called Savannah Wholesale. The owners of that company initially sold socks to customers from the trunk of a car. Eventually the company became a retailer and opened family apparel stores. The company grew significantly in the next 30 years, operating more than 130 stores and expanding all the way into Louisiana. Eventually, the stores were renamed Allied Department stores.

The Allied stores went through several ownership changes, being owned by companies called Michigan General, Variety Wholesalers and Hampshire Equity Partners.

Starting in 2000, the company starting changing the name of its stores to Citi Trends, and in 2001 the name of the entire company was changed. It now has approximately 3,000 employees - 330 in Savannah - and 6,000 shareholders.